Henkel Q1 results are strong but Western Europe and Russia still prove challenging


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Henkel Q1 results are strong but Western Europe and Russia still prove challenging

Related tags Organic sales growth Eastern europe Russia Europe

German manufacturer Henkel posted good results for the first quarter 2015 but admitted that things were still to pick up in Western Europe whilst the situation in Russia and the Ukraine is still expected to have an effect on earnings.

The results saw sales rise significantly by 12.7%, reaching a new quarterly high of €4,430 million, with the Beauty Care business unit posting a solid increase in organic sales of 2.1%.

However, in the conference call following the results being released, the company’s CEO, Kasper Rorsted, said there was no sign of improving demand in mature markets in Europe.

"We are not seeing a pickup in Western Europe,"​ he said, before saying that the Russia-Ukraine crisis was also expected to knock €100 million euros off its earnings.

Overcoming challenges

“We expect the economic environment to remain difficult. Due to the continuing conflict between Russia and Ukraine, we still assume that the Eastern European economy will stagnate in 2015,”​ Rorsted says in the results announcement.

“In this context, a high degree of agility and flexibility will remain key success factors. We will therefore continue to simplify and accelerate our structures and processes.”

The Henkel boss did reiterate that he felt that despite the challenging environment, the company delivered a strong performance in the first quarter and had a good start to the fiscal year 2015.

“We again increased both sales and earnings. We achieved our highest quarterly sales to date, thanks to good organic sales growth, the impact of last year’s acquisitions and the strong US dollar,”​ he adds.

“All business units contributed to this successful quarter. Once again, we delivered a very strong performance in our emerging markets.”

On top of this, the Schwarzkopf hair care maker also confirmed its outlook for the current fiscal year, expecting organic sales growth of 3-5% to be achieved in 2015.

“We expect adjusted return on sales to increase to around 16 percent and anticipate an increase in adjusted earnings per preferred share of approximately 10 percent,”​ adds Rorsted.

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